Welcome to the IBEX Second Quarter Full Year 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I will now turn the conference over to your host, Ms. Brinlea Johnson with the Blueshirt Group.

Good afternoon and thank you for joining us today. Before we begin, I want to remind you that the matters discussed today on today's call may include forward-looking statements related to our operating performance, financial goals and business outlook, which are based on management's current beliefs and assumptions. Please note that these forward-looking statements reflect our opinions as of the date of this call and we undertake no obligation to revise this information, as a result of new developments, which may occur. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause our actual results to differ materially from those expected and described today. For a more detailed description of our risk factors, please review our final perspective filed with the US Securities and Exchange Commission on October 14, 2021. With that, I'll turn it over to Bob Dechant, CEO.

Thank you, Brinlea. Good afternoon, everyone and thank you all for joining us today as we discuss our second quarter fiscal year 2022 results. Karl and I are excited to be presenting to you today. We are now 18 months since our IPO of August 2020. We have made significant progress on our strategic initiatives over this time despite the challenges from the pandemic. We have built a business that has evolved and is accelerating meaningfully in terms of growth and new client wins. We have improved our client diversification, which was a risk at the time of the IPO and is now in an advantage. At the same time, our growth continues to dominate in our high margin regions. Importantly, we continue to transform our business into a digital-first business with so many great client brands referred to as BPO 2.0 over the last two years. We believe FY '22, will be a watershed year for IBEX with many key milestones within sight and our forward trajectory is even more exciting. As we shared with you last quarter, we were confident that our business was positioned to accelerate growth into Q2 and beyond and this is exactly what we delivered in the second quarter with record results. Revenues increased approximately 13% year over year representing a combined two-year growth of 23% and resulting in our highest revenue quarter ever of $132.2 million. LTM for revenue and EBITDA are $458 million and $61.8 million respectively resulting in a 7.1% organic growth and 13.5% EBITDA margin. The confidence we have in our business is allowing us to raise revenue guidance. However, the underlying narrative is even more compelling. In my six years at the helm, the growth engine we have built here is the strongest ever. Our revenue generated from new…

Thank you, Bob and good afternoon, everyone. Thank you for joining the call today. We are excited about our progress and the results we delivered in Q2. Our business is accelerating as a result of our success with clients in the digital first marketplace, as well as in our strategic FinTech and HealthTech verticals. Our performance highlights the level of differentiation that we have with our services, including our Wave X technologies. The momentum we are building will have a positive effect on our long term growth and margin trajectory. In my discussions of financial results, references to revenue and net income are on an IFRS basis while the adjusted net income, adjusted EBITDA and adjusted earnings per share, are on a non-GAAP basis. Reconciliations of our IFRS to non-GAAP measures are included in the tables attached to our earnings press release. Second quarter revenue increased 12.8% to $132.2 million compared to $117.2 million in the prior year quarter and 21.7% sequentially. We continue to experience high growth in our clients one since fiscal year '16. This cohort grew by 57% over the prior year quarter, and now represents 70% of our total revenue. The growth in revenue this quarter was offset by significant decreases related to our legacy top three clients. While these clients are down 38% from the prior year quarter, they are flat sequentially and now represent less than 20% or approximately $26 million in quarterly revenue. We expect this group's revenue base to remain around this level going forward, and that it will decrease as a percent of revenue over time. Net income in the second quarter was $8.5 million compared to $2.5 million in the same period last year. The increase in net income was primarily driven by $6.3 million decrease in the fair value…

[Operator instructions] Our first question comes from the line of Tobey Sommer from Truist Securities. Your line is now open.

Thank you. I was wondering if you could give us sort of map out over the next several quarters, how the margins improved and I'm focusing in on two vectors, the growth that you've done in seats, as well as kind of the added expenses associated with remote work at the same time, you're adding to sort of that duplicative nature and how that could you bridge us to the more profitable profile? Thank you.

Sure Tobey and hey, thanks for joining and appreciate the question. So when I think about our business, I think we have done a really, really good job of structurally building this business for double digit growth and continued trajectory on our EBITDA margin but based on when certain client which come in clusters sometimes like it did recently for us, you might get some fluctuations in your margins in quarter. But when I think more longer term on this, I feel like we've built this business that top line growth can be in that let's say upper single digits all the way up into the to mid-teens and I also believe that as we said, even a little while back, our midterm trajectory was north of 15% EBITDA, I think we're structurally pretty close to that and, so I think that trajectory really looked like that out over the next several quarters.

And you indicated that CapEx, you have some visibility into that perhaps diminishing after this -- from this elevated level. How, do you sort of get comfort in that view as being the right one?

Sure. Tobey and our CapEx over the last year driven by social distancing of our centers has been at a higher rate than historically has been. And so, we believe that there is at some point when we resume back to pre-pandemic operating models or close to that, we believe that we have a nice 18 month to two year trajectory of a lot lower CapEx. But then if we step back and think maybe just a little bit longer term, we're a growth company and so, I kind of feel like a that our CapEx will be in the overall to grow this business would be in about all in at about, I don’t know maybe about a 5% range. And that will allow us to grow that but we're also excited about that kind of next 24 months of limited CapEx and really as our centers fill back up again in a nonsocial distance environment and as said in my remarks, I think at that point we'll be generating it will be a very good effect from a free cash flow standpoint for us.

Thanks. If I could squeeze in one more, could we get your perspective on wages and inflation, both from a pricing perspective as you interface with customers, as well as internal costs and elevated rates of turnover as a result potentially and I know you have multiple geographies to draw from, in terms of your answer.

Sure. So very, very pertinent question today -- in today's environment and when you think about our business, we are growing outside the US and certainly in a market like the US, wages are certainly under pressure. How I look at this is our agent wages, which are really, really the important element. They range between 50% to 70% of call it like our total cost to operate ao, depending upon the geo. And so we've engaged around that, we've engaged with clients and have had success with clients, with sharing where the wages are going and consequently getting price adjustments, price increases from them. We are in a lot of our contracts, we've negotiated call it or cost of living adjustments into the contracts. So while we feel like maybe we're not a 100% covered right now, we've done a really good job as a company, kind of covering this ourselves that way, or a lot of it we'll continue to have further discussions with our current clients and like I said, a lot of our new clients we've brought on board have cost adjustments built into it.

Thank you. Our next question comes from the line of Dave Koning from Baird. Your line is now open.

Yeah. Hey guys. Great revenue momentum.

Yeah. Thanks Dave. Yeah, we're really excited about that. And we knew we had with all the new logos that we've been winning and just in the growth inside the base that we have a lot of good things going on here. Thanks.

Yeah, no, it's great to see and I guess, yeah, my first question kind of relates to that. It looked like when we put kind of some of the numbers you gave around the top three, it looked like those were down $5 million, but that means the non-top three were actually up sequentially $28 million. That's a massive amount. Was there anything non-recurring in there or is it all pretty steady kind of going forward? Or how should we think of all that?

Sure. what we're most excited about is, there's look and you know our business that we do have seasonal from, into retail around the holidays. And so there is a little bit of that, but the lion's share of our growth is go forward, sustainable. It's even, when I'll say, growth into, historical would be growth into Q3 and Q4 for us. So we're excited about that trajectory. And one data point I'll just share with you our historically our Q1 to Q2 growth is, kind of in that 7%, 8%, 9%, and us being in the twenties, 20%, 22% for us was really excited and that's all the new stuff that we brought on board that we shared last quarter.

That's that's great to see. And then two, just kind of quick ones, I'll just give them together. The wage inflation, is there any leg impact from the revenue, like the Cola that you can get, like does this year have more wage inflation the next year you get kind of that pick up in revenue that you can charge. And then when do those new shares that are being distributed, when do those hit the market and then I'm good. Thank you.

Okay. Sure. So, there is a little bit of a lag, but we got out in front of this with some of our key clients, our key embedded based clients and so, I guess I would say, from 25 years of being in this industry, I really like how our partnership with our clients have allowed us to get out and in front of this. So, feel very good about that and then obviously with a lot of the new clients that we've brought on board just recently, the cost structures we built are pretty current. And so I just like our position as we go forward, obviously there will be risk, there will be some pressure, but again, our US business is a much smaller percentage and that's where it's immediate now. And we expect probably we'll have some pressures in some of the other markets as we look out, but I think we've done a good job on that. And then Dave, the second part of your question, the new share. So as customary, there was a lockup period as those shares got distributed to the limited partners. That's, I believe about a six, not about, it's a six month lockup. So, I'd look at that to occur later in the later in the calendar year.

Thank you. Our next question comes from the line of Arvind Ramnani from Piper Sandler. Your line is now open.

Hi. Thanks for taking my questions. The first question I had was around kind of the exposure you have to certain industries. I think one company that stands out is Lyft and I'm sure the others, but just with kind of a lot of vaccinations in, and as we look into '22 kind of this kind of the kind of COVID, some of the COVID impact behind us, do you expect to see an uptake in transaction based volume from a certain segment of your customers? And is it material enough to kind of for us to think about it, or is it, or you feel it's various counterbalance where it doesn't really matter?

Or great, great question. I think your last part of that was probably most appropriate. I think there are some counter -- counterbalance as well. So and there are some sub-segments that we think the transactions will start moving up, but, I think those get offset and we'll, kind of get offset with some counterbalances and I'll just share with you, in the retail and eCommerce world with the supply chain issues and things like that. The number of -- the amount of, overall transactions, I think there, are a little bit off from where they were a year ago. And I think that's directly, to the supply chain. So when I think of those issues, those are probably out there for a little while and probably a little while past let's say if we get to a post COVID world. And so, I think those are counterbalances to some of the upsides.

Okay. Yeah. That, that -- that's helpful. And just in terms of the kind -- of the kind of the share repurchases, that you have as well as kind of the -- the yeah, actually, maybe just start with the, the share repurchases is like, I mean, certainly there's a word of confidence in going and buying -- buying stock at these -- at these at these levels, but do you, you kind of worry about it? Kind of liquidity as well, just given kind of the market cap of the stock, like, kind of 20 -- $20 million is, almost like 10% of fluid, right. So that's a big, big sort of repurchase said, just how do you think of think of, kind of the balance and float?

Great question. So first and foremost, the compelling IRR which, where we're trading is can be, it's too hard to pass up, just to be very clear on that, because we have so much confidence in our business. But they're back to, like we talked just prior counterbalances, right? So counterbalance is the, what I believe is what TRG has done of the distribution. And so, if you look out over -- over, beyond six months, I think our float will be in a much better environment as some of that becomes available. And so, we think it's such a great investment from our standpoint. We couldn't not do that, from a, wise use of our -- wise use of our capital. And again, we're, we're comparing that versus for us right now, investing into further buildouts, centers that we've been doing and doing that aggressively and had very short ROIs, the share buyback was even more compelling.

Yeah. Yeah. It makes sense. And just point of clarification no December 8th you announced this $20 million, is this the same 20 or is it, is it like 20 plus 20? I just, just…

Want to clarify that. No, yeah, yeah. Thank you for that. The clarifying that is the same, the same, the same 20 by the time we, this got implemented at all, it just kicked off in literally in in this quarter.

Okay, perfect. Yeah. That's all the questions had. Thank you.

Yeah. Thanks Ram.

Thank you. Our next question comes from the line of Matthew Roswell from RBC Capital Markets. Your line is now open.

Yes. Good. Couple of questions around the revenue growth cadence. How should we think about differences between a third and fourth quarter with the new contracts ramping up and as part of that, when does the sort of -- the legacy business stop being headwind to year on year revenue growth?

Great question and, and appreciate that. And so look, as we've guided and if, we obviously, have a, what I think is really good visibility to our business, and if you do the mathematics of everything, that I like the, this Q3, Q4 we'll follow a different curve. What we've had in the past, which is, a, sequential, sequential downturn. We have a lot of confidence, you know in, in that Matthew. And so and I apologize if you could part -- part B of your question, if you could just touch on that again, I apologize.

When, when -- when did you see clients stop being a headwind you're on your revenue growth?

Sure. So, yeah, yeah. So, so we, we, we look at that business as basically sequentially flat right now. And so, but it is, did have several, several quarters of sequential downturns. So, when I think of full comparisons by Q1 of this FY'23, that'll be, that'll be flat, but literally with it being 20% of our less than 20% of our business and now kind of in this flat sequential, we don't see that that really moving our -- really factoring into many headwinds into, into our business. So you will see the true growth engine of our business as we move into Q3, Q4 and then certainly as we, as we hit the ground running and FY’23.

Okay. And final accounting question, if I can sneak one in, the revaluation on the Amazon warrant, that's solely tied to your stock as opposed to any change in the relationship with Amazon. Correct?

Correct.

Correct. And Carl, why don't, if you want, maybe you could add a little color on that.

Sure, sure. It, it is it's related to you do a mark to market on the on the liability, at the end of each quarter which is impacted by the stock price. So the stock price goes up, which would've been consistent with Q2 of last year. You saw a positive impact and if it goes down like Q2 of this year, fiscal year '22 it was a negative to the income statement, but it's, it's solely on the mark, the market that you're doing on the liability, nothing with the overall relation with Amazon. Okay. Thank you.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to management for closing remarks,

Thanks. So look, I thank you all for attending. We are as you can tell, very excited about the trajectory of our business. What we built here is we feel very proud about, and we look forward to seeing you all next quarter, as we share -- share the exciting journey here. So thank you all and have a good night.

This concludes today's conference call. Thank you for participating you now disconnect.